J.C. Penney's Mickey Drexler Moment: Could Going Private Save The Company?

On the surface, J.C. Penney doesn’t have much in common with J. Crew besides its first initial. For starters, the woman spending $395 on a shirtdress at the preppy-chic chain is not the same customer seeking “fair and square pricing” at the big-box mall staple.

But in the wake of CEO Ron Johnson’s ouster on Monday, troubled J.C. Penney needs to look to J. Crew’s turnaround to save itself, say retail analysts.

“It’s absolutely time for a Mickey Drexler moment,” said Brian Sozzi of Belus Capital Management, who’s been following J.C. Penney’s fortunes closely since Johnson was lured with great fanfare from Apple in 2011. “They have to go private.”

Retail veteran Millard “Mickey” Drexler famously returned J. Crew to profitability last year after taking it off the stock market in 2011 in a $3 billion private equity buyout.

Drexler was able to clean house in the C-suite out of the public eye while retooling the brand’s merchandise, moving it upscale (think more cashmere). In the second quarter of 2012, the now privately held purveyor of plaid and corduroy reported net income topping $22 million compared with a $10.5 million loss the year before.

Trutina Financial retail analyst Patty Edwards thinks J.C. Penney could benefit from a similar break from constant scrutiny. “Ron Johnson couldn’t have sneezed without setting off alarm bells,” she said.

“They need spring cleaning, but without the media watching. You’ve got the whole situation messed up with hedge fund managers having testosterone matches. Honestly, an operation should be performed behind operating room doors.”

Experts seem to agree that any real triage won’t take place under the guidance of Myron “Mike” Ullman, Johnson’s predecessor at J.C. Penney and now its interim CEO following the exit of the former Apple retail guru.

“He’s a stop-gap,” said Jeffrey Hayzlett who, as the former CMO of Kodak, knows a thing or two about attempted turnarounds. “He’s a familiar face, which makes sense; they need him right this minute as they’re making decisions about what to put on the floor for Thanksgiving and Christmas.”

Hayzlett isn’t sure following J. Crew’s formula and going private will ultimately save J.C. Penney, however. “It won’t fix their retail problems, and they’re hemorrhaging cash,” he said.

Then there’s the problem of leadership. Drexler is a notorious micro-manager who can reel off items from J. Crew’s catalog and regularly addresses staffers on store PA systems. Johnson, by way of contrast, fled J.C. Penney’s Plano, Texas headquarters to go home to California via corporate jet every weekend.

“If I were Ullman right now I’d be living in a cot in the store and doing everything I can to motivate employees,” Hayzlett said.

Sozzi predicts Ullman will hand the baton to a new CEO, hired from outside the flailing retailer, sometime in 2014. And, added Edwards, it could go private even sooner with renewed interest from top private equity firms.

“Leonard Green and Apollo are sniffing around,” she said. “J.C. Penney is a company we as the public want to keep around, but it doesn’t have a place trading publicly until they get their house in order.”

Forbes.com